Archive for October, 2010

The Power of a Name – Choosing A Brand Name

A brand’s name is perhaps the most important factor affecting perceptions of it. In the past, before there was a wide range of brands available, a company could name a product just about anything. These days, however, it is necessary to have a memorable name that conjures up images that help to position the product.

Ries and Trout favor descriptive names rather than coined ones like Kodak or Xerox. Names like DieHard for a battery, Head & Shoulders for a shampoo, Close-Up for a toothpaste, People for a gossip magazine. While it is more difficult to protect a generic name under trademark law, Ries and Trout believe that in the long run it is worth the effort and risk. In their opinion, coined names may be appropriate for new products in which a company is first to market with a sought-after product, in which case the name is not so important.

Margarine is a name that does not very well position the product it is describing. The problem is that it sounds artificial and hides the true origin of the product. Ries and Trout propose that “soy butter” would have been a much better name for positioning the product as an alternative to the more common type of butter that is made from milk. While some people might see soy in a negative light, a promotional campaign could be developed to emphasize a sort of “pride of origin” for soy butter.

Another everyday is example is that of corn syrup, which is viewed by consumers as an inferior alternative to sugar. To improve the perceptions of corn syrup, one supplier began calling it “corn sugar”, positioning it as an alternative to cane sugar or beet sugar.

Ries and Trout propose that selecting the right name is important for positioning just about anything, not just products. For example, the Clean Air Act has a name that is difficult to oppose, as do “fair trade” laws. Even a person’s name impacts his or her success in life. One study showed that on average, schoolteachers grade essays written by children with names like David and Michael a full letter grade higher than those written by children with names like Hubert and Elmer.

Eastern Airlines was an example of a company limited by its name. Air travel passengers always viewed it as a regional airline that served the eastern U.S., even though it served a much wider area, including the west coast. Airlines such as American and United did not have such a perception problem. (Eastern Airlines ceased operations in 1991.)

Another problem that some companies face is confusion with another company that has a similar name. Consumers frequently confused the tire manufacturer B.F. Goodrich with Goodyear. The Goodyear blimp had made Goodyear tires well-known, and Goodyear frequently received credit by consumers for tire products that B.F. Goodrich has pioneered. (B.F. Goodrich eventually sold its tire business to Uniroyal.)

Other companies have changed their names to something more general, and as a result create confusion with other similar-sounding companies. Take for instance The Continental Group, Inc. and The Continental Corporation. Few people confidently can say which makes cans and which sells insurance.

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The No-Name Trap in Brand Recognition

People tend use abbreviations when they have fewer syllables than the original term. GE is often used instead of General Electric. IBM instead of International Business Machines. In order to make their company names more general and easier to say, many corporations have changed their legal names to a series of two or three letters. Ries and Trout argue that such changes usually are unwise.

Companies having a broad recognition may be able to use the abbreviated names and consumers will make the translation in their minds. When they hear “GM”, they think “General Motors”. However, lesser known companies tend to lose their identity when they use such abbreviations. Most people don’t know the types of business in which companies named USM or AMP are engaged.

The same applies to people’s names as well. While some famous people are known by their initials (such as FDR and JFK), it is only after they become famous that they begin using their initials. Ries and Trout advise managers who aspire for name recognition to use an actual name rather then first and middle initials. The reason that initials do not lead to recognition is that the human mind works by sounds, not by spellings.

TWA : Kansas City's Hometown AirlineMost companies began selling a single product, and the name of the company usually reflected that product. As the successful firms grew in to conglomerates, their original names became limiting. Ries and Trout advise companies seeking more general names to select a shorter name made of words, not individual letters. For example, for Trans World Airlines, they favored truncating it simply to Trans World instead removing all words and using the letters TWA.

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The Brand Name-Free-Ride Trap

A company introducing a new product often is tempted to use the brand name of an existing product, avoiding the need to build the brand from scratch. For example, Alka-Seltzer named a new product Alka-Seltzer Plus. Ries and Trout do not favor this strategy since the original name already in positioned in the consumer’s mind. In fact, consumers viewed Alka-Seltzer Plus simply as a better Alka-Seltzer, and the sales of Alka-Seltzer Plus came at the expense of Alka-Seltzer, not from the market share of the competition.
The 22 Immutable Laws of Marketing: Violate Them at Your Own Risk!

Some firms have built a wide range of products on a single brand name. Others, such as Procter & Gamble have selected new names for each new product, carefully positioning the product in a different part of the consumer’s mind. Ries and Trout maintain that a single brand name cannot hold multiple positions; either the new product will not be successful or the original product bearing the name will lose its leadership position.
Nonetheless, some companies do not want their new products to be anonymous with an unrecognized name.

However, Ries and Trout propose that anonymity is not so bad; in fact, it is a resource. When the product eventually catches the attention of the media, it will have the advantage of being seen without any previous bias, and if a firm prepares for this event well, once under the spotlight the carefully designed positioning can be communicated exactly as intended. This moment of fame is a one-shot event and once it has passed, the product will not have a second chance to be fresh and new.

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When Product Line Extensions Become a Trap!

Line extensions are tempting for companies as a way to leverage an existing popular brand. However, if the brand name has become near generic so that consumers consider the name and the product to be one and the same, Ries and Trout generally do not believe that a line extension is a good idea.

Consider the case of Life Savers candy. To consumers, the brand name is synonymous with the hard round candy that has a hole in the middle. Nonetheless, the company introduced a Life Savers chewing gum. This use of the Life Savers name was not consistent with the consumer’s view of it, and the Life Savers chewing gum brand failed. The company later introduced the first brand of soft bubble gum and gave it a new name: Bubble Yum. This product was very successful because it not only had a name different from the hard candy, it also had the the advantage of being the first soft bubble gum.

Ries and Trout cite many examples of failures due to line extensions. The consistent pattern in these cases is that either the new product does not succeed, or the original successful product loses market share as a result of its position being weakened by a diluted brand name.

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When Product Line Extensions Work!

Despite the disadvantages of line extensions, there are some cases in which it is not economically feasible to create a new brand and in which a line extension might work. Some of the cases provided by Ries and Trout include:

Low volume product
– if the sales volume is not expected to be high.

Crowded market – if there is no unique position that the product can occupy.

Small ad budget – without strong advertising support, it might make sense to use the house name.

Commodity product – an undifferentiated commodity product has less need of its own name than does a breakthrough product.

Distribution by sales reps – products distributed through reps may not need a separate brand name. Those sold on store shelves benefit more from their own name.

The concept of positioning applies to products in the broadest sense. Services, tourist destinations, countries, and even careers can benefit from a well-developed positioning strategy that focuses on a niche that is unoccupied in the mind of the consumer or decision-maker.

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Mission and the Market

A market is defined as individuals, organizations with purchasing power, and desire/ willingness to purchase.

Markets can be categorized based on the buyers as follows:

Producers market trade in raw material, equipment, supplies, machines etc.

Reseller market trade in finished goods, services from producers

Consumer market: refers to market where end consumer buys the products for personal or household use. Consumer market can be bifurcated into durables and non-durables markets. The non-durable products are also known as fast moving consumer goods.

The principal means of classification are:

(a) By geographical spread, such as national, regional and local
(b) By target group, such as consumer advertising, industrial advertising or trade advertising
(c) By type of impact such as

  • Primary demand or selective demand advertising,
  • Direct or indirect action advertising, and
  • Institutional advertising.

Markets comprise of heterogeneous segments of consumers. Market segmentation refers to process of identifying a group of buyers with similar buying desires and requirements. The marketeer with a distinct marketing mix targets each segment.

Companies, whether they are big or small experience a similar challenge. In such a confused situation, ‘Segmentation’ comes in handy! Segmentation is defined as the process of dividing a market into distinct sub-sets of consumers with common needs or characteristics and selecting one or more segments to target.

Segmentation is the first step in a marketing strategy. Once marketers divide the market into various groups, they can then select their ‘targeted segments’ and design products that suit their requirements. For instance, companies like BPL have resorted to market segmentation as a strategy to beat its competitors. Its products like: BPL Loewe (digital designer televisions for the premium-end of the market); Matrix Flatscreen TV (for technology lovers); Studioline (who are performance seekers); and Prima (for the lower-end of the market) are a case in point. Each of them has been designed to cater to the requirement of a particular segment.

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Basis of Segmentation

Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms (Haworth Series in Segmented, Targeted, and Customized Market)The first step in developing a segmentation strategy is to identify the basis on which the market segmentation is done. There are eight categories of customer characteristics that form the basis for segmentation. The categories are:

1.Geographic segmentation: The market is divided according to the location. The classification is based on the assumption that people living in the same area share similar habits and wants. However, there’s a difference in the purchasing patterns of the consumer living in urban, semi-urban, and rural areas. For instance, as an Electrolux dealer, having a showroom in Hyderabad, you can advertise your company in and around Hyderabad via local newspapers, TV, radio, and other magazines.

On the basis of geographical spread, advertising can be classified as (a) national, (b) local and (c) global.

  • National Advertising: Some manufacturers may think that their target is the entire country. They select media with a countrywide base. Generally large, established firms belong to this category. Among them are Hindustan Lever, Brooke Bond, Larsen & Toubro, Escorts, Associated Cement Companies and the like.
  •  Local Advertising: Small firms may like to restrict their business to State or regional level. Some firms first localize their marketing efforts and once success has been achieved, they spread out to wider horizons. A classic example ‘is Nirma washing powder, which initially was sold in Gujarat and subsequently entered the other markets. Retail stores also undertake local advertising the area to be covered would generally be a city or a town and media would be selected t principally relates to that area. In recent years, several magazines have appeared which focus on a particular city and are of direct relevance to its inhabitants like the Bombay and Iskl11d.

Sometimes large firms may also go in for local advertising, e.g., when they undertake pretest of a product, especially consumer product in selected areas before embarking promotional campaign on a national level.

  • Global Advertising: Multinational firms treat the world as their market. Firms like National, IBM or Sony or Ford advertise globally, e.g., in periodicals like Times, Reader’s Digest.

However, with the increase in the popularity of the television and satellite communications, marketers strongly believe that the geographic segmentation can be replaced by a single global marketing strategy.

2. Demographic segmentation: The segmentation is based on characteristics like age, sex, marital status, income, occupation, and education. It’s the most accessible and cost-effective way to identify your target market.

3. Psychological/psycographic segmentation: Psychological characteristics refer to the inner qualities of a person. For instance, consumers are divided on the basis of their needs and motivations, personality, perceptions, learning, level of involvement, and attitudes.

As an executive dealer you can provide a questionnaire to the people residing in the area with questions like: Do you like book reading or not? How often you go out for movies and picnics? What channels do you prefer watching etc. Depending on these questions you can segment the consumers and offer products that matches their lifestyle.

4. Sociocultural segmentation: This is another basis for segmentation. Markets are divided depending on factors like family life cycle, social class, cultural values, and cross-cultural affiliations. Culturally distinct segments offer excellent growth avenues for marketers. However, care should be taken while advertising the products. For instance, if you are selling the Whirlpool refrigerator with the ‘instant cool’ feature, sell it as a means of convenience for a workingwomen family. However, the same should appeal as a ‘status symbol’ for the upper class.

5. Use-Related segmentation: It’s the most popular method of segmentation. Consumers are divided into different categories depending on the product, service, or brand usage characteristics like the rate of usage (consumers are divided depending on the number of times they use a product); Awareness status (Consumers are divided based on their knowledge level of a product. For instance, if a consumer instantly recalls all the features and models available/ yet to be launched in the market, his awareness level is high); and brand loyalty.

6. Usage-Situation Segmentation: This classification is based on the products/ services that the consumer uses depending on the situation. For instance, if you buy red roses to your wife on her birthday, you fall under one category.

7. Benefit-segmentation: The market is divided into segments depending on the benefits of the products. This sort of segmentation is used to communicate the product features to consumers. For instance, Bausch and Lomb advertises its disposable lenses as a form of convenience.

8. Hybrid segmentation: Instead of sticking to one particular segmentation style, marketers combine one or two segmentation variables and arrive at another segmentation. This style is referred to as Hybrid segmentation.

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Segmentation on the basis of target groups

Segmentation on the basis of target groups aimed at, advertising can be classified as –

  1. Consumer Advertising,
  2. Industrial Advertising,
  3. Trade Advertising,
  4. Professional Advertising.

Consumer advertising: A very substantial portion of total advertising is directed towards the consumers who purchase them either for their own use or for their household. The main point to be remembered here is that buyers of consumer items are generally very large and are widely distributed over a large geographical area, which enhances the importance of advertising as a marketing tool. Looking into at random any general print media, such as newspapers, magazines etc, can see such advertising. These advertisements are intended to promote sale of the advertised products appealing directly to the buyers/consumers. Such advertising is called consumer advertising.

Industrial Advertising: Industrial advertising on the other hand refers to those advertisements, which are issued by the manufacturers/distributors to the buyers of industrial products. This category would include machinery and equipment, industrial intermediates, parts and components, etc. Because of the unique characteristics of industrial buying decision process, the importance of industrial advertising is comparatively lower than that of consumer advertising.

Trade Advertising: Advertisements, which are directed by the manufacturers to its distribution channel members, such as wholesalers or retailers, are called trade advertising. The objective of such advertising is to promote sales by motivating the distribution channel members to stock or to attract new retail outlets.

Market Segmentation: How to do it, how to profit from itProfessional Advertising: There are certain products for which the consumers themselves are not responsible for the buying choice. The classic examples are pharmaceuticals where doctors make decision while the consumers are the patients. Almost similar situation exist in the field of construction where architects, civil engineers and contractors are the decision makers. Firms operating in such market segments, therefore, have to direct their advertising to these decision makers, who are professional people. Such advertising is called professional advertising.

With increasing competition, players try out to carve separate niche, which leads to greater segmentation of the market. As each brand needs significant investment for launch as well to sustain equities, the plethora of brands become unmanageable. The process of restructuring and cost engineering results in consolidation and phasing out of weaker brands and thereby reducing the market segmentation.

Segmentation as a tool is effective in understanding the consumer and the market associated with your brand. Only a proper understanding of it will give you an understanding as to how to make your advertising campaign.

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Types of Segmentation

It is the dividing of a market into distinct groups of buyers on the basis of needs, characteristics, or behavior who might require separate products or marketing mixes.

Segment marketing : Isolating broad segments that make up a market and adapting to match the needs of one or more segments.

Niche Marketing: Focusing on sub-segments or niches with distinctive traits that may seek a special combination of benefits.

Micro Marketing: The practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations –includes local marketing and individual marketing.

Local marketing: Tailoring brands and promotions to the need and wants of local customer groups –cities, neighborhoods, and even specific stores.

Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers –also labeled one-to-one marketing, customized marketing and markets –of-one marketing.

Types of Segmentation

  • Geographical: India, Delhi, Lajpat Nagar
  • Demographic: 24 Yrs old Married woman working and earning 15K P.M, is an MBA
  • Psychographic: Upper class, golfing, CEO.
  • Behavioral: Rohit is a Regular shopper, believes in Quality, Brand loyal and likes to wear those brands which exudes Positivity.

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Age As A Basis for Demographic Segmentation

A very basic but useful a priori demographic segmenting variable is age. People often seek different features or benefits depending upon their age (and, relatedly, their family life-cycle stage). Consequently, people in different age groups often differ in which brands they prefer within a product category, and it is sometimes possible to target particular brands at particular age groups. Researchers have found that a person’s “cognitive age” is a much better predictor of purchase patterns than “actual” (chronological) age. For instance, a forty-year-old man may still feel as if he was in his thirties, in terms of interests and activities. Therefore, it is useful to learn as much as possible about prospective target segments.

The questions you should be asking yourselves are:

What kinds of products and services will your target age group want to buy, what kinds of features will they seek, what kinds of advertising appeals and personalities will they be most responsive to?
The answers to the above will give you a fair amount of insight into the designing of your offering to the particular age group.
For example, the advertisements for cosmetics will invariably show a young woman even if it aims at marketing at all the age group. ‘I am a Complan girl”, is an advertisement focused at the young teens & adolescents, where as an advertisement about liquor is about a matured age group.
So segments of different age groups often need different advertising approaches, both in terms of message and execution. Some advertisers argue that today’s teenagers, used to rapidly edited music videos, also need ads with such quick-cut, “jazzy” shots’ to have any hope of appearing “cool”. Both young children (under age five), and elderly (over sixty-five) consumers have special needs in the way information is communicated to them, because of differences in the way they process information compared to other consumers.

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